Ukraine steelmaker Metinvest will redirect some of its merchant pig iron output to steel production, increasing slab and hot-rolled coil exports, chief executive officer Yuriy Ryzhenkov told Fastmarkets in an interview.

"This year we expect the increase of steel production at Ilyich [Iron & Steel Works] by 800,000 tonnes - that will lead to a reduction of our merchant pig iron sales," Ryzhenkov said.

Metinvest completed the active construction stage of a new continuous casting machine (CCM), which started up last November at its Ilyich Iron and Steel Works in Mariupol.

The CCM is operating according to design capacity during the first quarter of 2019, the CEO said, but it will have capacity for 2.5 million tonnes per year. The launch of the equipment will boost slab production capacity at the mill to 4 million tpy, an increase of 1.5 million tpy. The unit's outdated CCM No1 will be shut.

Ilyich Steel currently is able to produce around 4 million tpy of steel and around 5 million tpy of pig iron, Fastmarkets estimated.

"We will take out of the market definitely 500,000 tonnes of pig iron, but it can be up to 1 million tonnes depending on the market," Ryzhenkov told Fastmarkets. 

Metinvest was the largest global pig iron supplier in 2018, shipping 2.7 million tonnes to customers. That was a sharp increase from 2017, when pig iron sales were 1.7 million tonnes, according to a financial report released by the company on Thursday March 21. 

Metinvest makes pig iron for external sales at Ilyich and at Zaporizhstal Iron and Steel Works. 

Zaporizhstal is 49%-owned by Metinvest, which also acts as its trade agent.

Metinvest shipped 1.04 million tonnes of pig iron from Zaporizhstal in 2018; pig iron shipments from the mill totaled 300,000 in 2017.

Merchant slab and HRC exports to increase in 2019 
"Half of additional volumes [800,000 tonnes of steel] will be sold in slabs and the second part will be rolled into flat products," Ryzhenkov said.

"Large slabs suppliers, Novolipetsk Steel in particular, have planned maintenances this year. That is why we expect the shortage in our usual outlets - in European, Black Sea and Mediterranean markets. That is why we are planning to ship additional tonnages of slabs to re-rolling assets in our traditional markets," the CEO added.

In 2018, Ukraine - where Metinvest is the only slab and flat steel supplier - exported 2.57 million tonnes of slab, according to the International Steel Statistics Bureau (ISSB).

Metinvest sold 1.32 million tonnes of slab to third parties in 2018, the company said in its financial report. The steelmaker also feeds its European flat-rolling assets with slab produced at Ukrainian sites. 

Ryzhenkov said additional volumes of HRC will be shipped to Metinvest's traditional outlets - North Africa, Gulf Co-operation Council (GCC) countries and Turkey. 

HRC exports from Ukraine totaled 1.13 million tonnes in 2018, according to the ISSB.

Metinvest to cut slabs sales in 2020
In the second half of 2019, Metinvest plans to complete the reconstruction and commission of Ilyich's hot strip mill, which will increase its rolling-mill capacity to 2.5 million tpy from 1.5 million tpy, Ryzhenkov said. 

"That is why next year we are planning to re-roll the lion's share of slabs into HRC, so there will be almost no merchant slabs at Ilyich Steel," Ryzhenkov told Fastmarkets.

"The aim of the company is to make products with higher added value, not semis or raw materials, but everything will depend on the market [conditions]. We evaluate the gap between slabs and other products, and if it is profitable for us to sell slabs we will sell slabs," he added. 

Fastmarkets' annual average price assessment for Commonwealth of Independent States export slab was $510.37 per tonne fob Black Sea in 2018. Meanwhile the annual average price assessment for CIS export high-manganese pig iron was $373.46 per tonne fob Black Sea, and the average annual price for CIS-origin export HRC was $550.57 per tonne fob Black Sea.

Thus, the average gap between export HRC and slab prices was $40.20 per tonne, while the average gap between slab and pig iron prices was $136.91 per tonne. 

Fastmarkets' weekly price assessment for CIS export slab was $495-505 per tonne fob Black Sea on March 18, and the assessment for export HRC was $510-520 per tonne fob Black Sea on the same day. That puts the gap at $15 per tonne.

Meanwhile, Fastmarkets' price assessment for CIS exports of high-manganese pig iron was $340-350 per tonne fob Black Sea on March 21, putting the gap at $155 per tonne. 

Adjusted earnings before interest, taxes, depreciation and amortization at Metinvest was $2.5 billion in 2018. That marked a 23% increase from 2017, when it was $2.04 billion.

Source from Fastmarkets MB